iQ Domestic Income Model
Investment Objective
The iQ Domestic Income Model is designed for investors who want their portfolio working for them every month. Income comes first — capital appreciation is a welcome bonus, not the primary goal. The strategy achieves this by systematically selecting the most compelling closed-end and exchange-traded funds from across the domestic fixed income landscape, covering everything from municipal debt and investment grade bonds to high yield, U.S. government securities, mortgages, and inflation-protected instruments. The Model rebalances every February, May, August and November.
Investment Process
The model begins with every domestically-traded closed-end and exchange-traded income fund across nine fixed income categories — Alternative Income, Municipal Debt, Convertible Securities, Investment Grade Debt, Flexible Income, U.S. Government, Loan Participation, U.S. Mortgage, and High Yield Debt — and works through a sequential series of filters to arrive at 5 holdings.
First, funds are ranked by trading volume and the top 100 advance, ensuring the portfolio only considers funds with sufficient liquidity for practical implementation. From those 100, funds are ranked by 6-month exponential price momentum and the top 40 move forward — identifying funds that have been gaining ground recently. Those 40 are then ranked by 24-month RSI and the top 10 advance, filtering for funds with sustained longer-term strength rather than just a recent spike. Finally, the 5 funds with the highest dividend yield are selected from those 10 — ensuring the portfolio's income credentials are as strong as its technical profile.
Potential Benefits
The breadth of the starting universe is one of the model's most practical strengths. By drawing from nine fixed income categories — including inflation-protected bonds, municipals, high yield, and mortgages — the strategy is never artificially constrained to a single corner of the income market. Wherever the most compelling income opportunities exist at a given point in the cycle, the model can find them.
The sequential filtering process is designed so that each step asks a different question. Volume ensures tradability. Momentum identifies funds the market has been rewarding. Long-term RSI confirms that strength has persisted over time rather than appearing overnight. And yield as the final filter ensures the portfolio never loses sight of its primary objective — delivering income. A fund that clears all four hurdles is liquid, technically strong on both a short and long-term basis, and genuinely high-yielding. That is a high bar, and it is applied consistently every seasonal quarter without exception.
Potential Risks: Concentrating in just 5 funds means the portfolio is meaningfully exposed to any single holding experiencing a distribution cut, a sharp price decline, or a deterioration in the underlying credit environment. High yield and loan participation funds in particular carry credit risk that can surface quickly in economic downturns, and momentum-based selection may keep the portfolio in those areas longer than a fundamentals-first approach would. Rising interest rates can also pressure the entire fixed income universe, limiting the diversification benefits that the breadth of the starting universe would otherwise provide.